Quantitative Restrictions – An Overview

Dec 13, 2013

ByTarun Bhati

Introduction

Article XI of GATT contains one of the cornerstones of
the disciplines regarding multilateral trade regime established under the WTO
i.e. general elimination of quantitative restrictions. Article XI is applicable
to all the measures prohibiting or restricting importation, exportation and
sale for export of products other than duties taxes or other charges. For
instance, export quotas, tariff values, licensing requirements, etc., are all
measures covered by Article XI. It is needless to say that Article XI is very
broad in its application.

In order to appreciate the true scope of Article XI it
is necessary to understand three key concepts viz., prohibitions, restrictions
and measures. It is also necessary to remember that the term ‘quantitative
restriction’, besides the general title, is not used anywhere in Article XI.

However, this
fact is not determinative of the correct interpretation of Article XI [see end note 1]
which must be broadly interpreted.

Meaning of the
terms ‘prohibition’ and ‘restriction’ used in Article XI

The word ‘prohibition’ is used in a very broad manner
and is understood to mean as a "legal ban on the trade or importation of a
specified commodity"[see end note 2].
For instance prohibition on importation of foreign products would be
inconsistent with Article XI:1. The scope of the term ‘restriction’ is also
broad and in terms of its ordinary meaning covers a limitation on action, a
limiting condition or regulation[see end note 3].
The term cannot be equated with prohibition [see end note 4]
and the previous panels have suggested that a restriction need not be a
blanket prohibition or a precise numerical limit [see end note 5].
A survey of previous jurisprudence would suggest the following:

"bond requirements" are not
restrictions inconsistent with Article XI:1[see end note 6].

measures, which affect the opportunities for
importation itself are covered by Article XI [see end note 9].

Fines, imposed an enforcement measure of import
prohibition, notwithstanding that they are not border measures, are
covered under Article
XI:1[see end note 10].

While it is true that quantitative restrictions such
as import quota which may not actually restrict
or impede trade are prohibited under Article XI [see end note 11],
Article XI extends to de facto restrictions [see end note 12]
as well and the very potential to limit trade is sufficient to constitute a restriction [see end note 13]. Further, the jurisprudence provides that "measures which involve no formal
restriction but rather a network of strong suggestions can fall within the
scope of Article
XI:1"[see end note 14].
In other words Article XI encompasses "import limitations made effective
through disincentives to importation, without a formal numerical limit on imports"[see end note 15].

Meaning of the
term ‘Other measures’ used in Article XI

Article XI, besides quotas and licenses, also covers ‘other
measures’. In terms of the previous jurisprudence, the term ‘measures’ not only
covers laws and regulations, but irrespective of the legal status, applies to a
measure instituted by a member, which restricts imports or exports [see end note 16]. In fact, the term ‘other measures’ is
meant to encompass a broad ‘residual’ category and is meant to underscore the
broad nature of measures under Article XI,[see end note 17]
in keeping with the mandate of Article XI to cover any measure that results in any form of limitation imposed on, or in relation to importation [see end note 18]. Indeed, the significance of the phrase ‘other measures’ is contained in
the fact that Article XI would have included only those restrictions and
prohibitions that are specifically listed in Article XI, if the words ‘other
measures’ had not been
included [see end note 19].
Conclusion

Thus, Article XI is broadly worded and includes de jure as well as de facto restrictions on imported goods. The application of the
tests detailed above will involve an assessment of how regulations affect the
competitive conditions relating to imported goods. The tests to be applied with regard to a
claim under Article XI are, therefore, governed by its own disciplines, which
have been developed by way of interpretations by panels and the Appellate Body.
Hence, an analysis of a claim under Article XI will involve the application of
the principles outlined above on a case-by-case basis, as well as a thorough
understanding of the regulatory regime and its effects on imported goods.

[ The author is an Associate, International
Trade Practice, Lakshmikumaran & Sridharan, New Delhi ]